<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
(Mark One)
X Quarterly report pursuant to Section 13 or
15(d) of the Securities Exchange Act of 1934
For the quarterly period ended June 30, 1995 or
_____ Transition report pursuant to Section 13 or
15(d) of the Securities Exchange Act of 1934
For the transition period from __________ to __________
Commission file number 1-5528
WEDCO TECHNOLOGY, INC.
(Exact name of registrant as specified in its charter)
New Jersey 22-1689437
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
P.O. Box 397 Bloomsbury, New Jersey 08804
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 908-479-4181
Not Applicable
(Former name, former address and former fiscal year, if
changed since last report).
<PAGE>
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practicable date.
Class Outstanding at August 10, 1995
Common Stock, $.10 par value 3,567,785
<PAGE>
<PAGE>
WEDCO TECHNOLOGY, INC. AND CONSOLIDATED SUBSIDIARIES
INDEX
Page No.
PART I. Financial Information:
Consolidated Balance Sheets - 1-2
June 30, 1995 and March 31, 1995 (Unaudited)
Consolidated Statements of Income - For the Three Months 3
Ended June 30, 1995 and 1994 (Unaudited)
Consolidated Statements of Changes in Stockholders 4
Equity - For the Three Months Ended June 30, 1995
(Unaudited)
Consolidated Statements of Cash Flows - For the Three Months 5
Ended June 30, 1995 and 1994 (Unaudited)
Notes to Consolidated Financial Statements (Unaudited) 6-7
Management's Discussion and Analysis of Financial 8-11
Condition and Results of Operations
PART II. Other Information 12
Signatures 13
<PAGE>
TABLE
<PAGE>
WEDCO TECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1995 AND MARCH 31, 1995 (UNAUDITED)
<CAPTION>
June 30, 1995 March 31, 1995
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash $1,290,930 $1,039,760
Accounts receivable, less allowance
for doubtful accounts of $52,561
at June 30 and $52,568 at March 31 6,835,645 7,960,327
Due from related parties - current 542,329 760,686
Inventories 2,132,314 2,031,009
Prepaid expenses and other current assets 924,665 990,303
Total current assets 11,725,883 12,782,085
PROPERTY, PLANT AND EQUIPMENT,
less accumulated depreciation of $27,220,041
at June 30 and $26,324,868 at March 31 38,423,458 37,217,297
OTHER ASSETS:
Investment in joint ventures 4,836,264 4,801,795
Land 2,298,109 2,298,109
Due from related parties 818,811 833,987
Other 53,799 59,919
Total other assets 8,006,983 7,993,810
TOTAL $58,156,324 $57,993,192
</TABLE>
<PAGE>
<PAGE>
<TABLE>
WEDCO TECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1995 AND MARCH 31, 1995 (UNAUDITED)
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY June 30, 1995 March 31, 1995
<S> <C> <C>
CURRENT LIABILITIES:
Notes payable $ 3,361,830 $ 3,103,827
Current maturities of long-term debt 1,762,790 1,761,020
Accounts payable 3,038,631 3,688,585
Accrued payroll 1,000,707 1,099,229
Accrued expenses 495,521 354,100
Accrual for environmental cleanup 72,000 72,000
Federal, state and foreign income
taxes payable 880,562 903,841
Other current liabilities 1,261,423 1,166,260
Total current liabilities 11,873,464 12,148,862
LONG-TERM DEBT, LESS CURRENT MATURITIES 15,905,122 15,721,787
ACCRUAL FOR ENVIRONMENTAL CLEANUP 228,621 249,327
DEFERRED INCOME TAXES 2,588,486 2,762,546
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, $.10 par value, authorized
10,495,000 shares, issued 4,094,891 shares
at June 30 and March 31 409,489 409,489
Additional paid-in capital 11,159,205 11,159,205
Retained earnings 17,378,518 16,740,328
Equity adjustment from foreign
currency translation 1,891,779 2,080,008
Total 30,838,991 30,389,030
Less treasury stock - at cost, 527,106 shares
at June 30 and at March 31 (3,278,360) (3,278,360)
Stockholders' equity - net 27,560,631 27,110,670
TOTAL $58,156,324 $57,993,192
<FN>
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<PAGE>
<TABLE>
WEDCO TECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED JUNE 30, 1995 AND 1994 (UNAUDITED)
<CAPTION>
1995 1994
<S> <C> <C>
NET REVENUES $11,209,348 $9,671,400
OPERATING EXPENSES:
Costs of services rendered and products sold 6,979,973 5,467,747
Selling, general and administrative expenses 2,031,308 1,804,756
Depreciation 966,196 798,248
Total operating expenses 9,977,477 8,070,751
OPERATING INCOME 1,231,871 1,600,649
OTHER INCOME (EXPENSES):
Equity in income of joint ventures 44,607 147,416
Interest expense - net (371,464) (331,211)
Other - net 12,220 1,396
Total other income (expenses) (314,637) (182,399)
INCOME BEFORE INCOME TAXES 917,234 1,418,250
INCOME TAXES 279,044 464,560
NET INCOME $ 638,190 $ 953,690
NET INCOME PER COMMON AND COMMON
EQUIVALENT SHARE $.18 $.26
AVERAGE COMMON AND COMMON EQUIVALENT
SHARES OUTSTANDING 3,605,034 3,612,528
<FN>
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<PAGE>
<TABLE>
WEDCO TECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED JUNE 30, 1995 (UNAUDITED)
<CAPTION>
Equity
Adjustment
Common Stock Additional from Foreign
Number Paid-in Retained Currency
of Shares Amount Capital Earnings Translation
<S> <C> <C> <C> <C> <C>
Balance, April 1, 1995 4,094,891 $409,489 $11,159,205 $16,740,328 $2,080,008
Net income 638,190
Adjustment resulting from foreign
currency translations (188,229)
Balance, June 30, 1995 4,094,891 $409,489 $11,159,205 $17,378,518 $1,891,779
</TABLE>
<TABLE>
<CAPTION>
Treasury Stock
Number
of Shares Amount
<S> <C> <C>
Balance, April 1, 1995 (527,106) $(3,278,360)
Net income
Adjustment resulting from foreign
currency translations
Balance, June 30, 1995 (527,106) $(3,278,360)
</TABLE>
[FN]
See notes to consolidated financial statements
<PAGE>
<TABLE>
WEDCO TECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED JUNE 30, 1995 AND 1994 (UNAUDITED)
<CAPTION>
1995 1994
<S> <C> <C>
Cash Flows From Operating Activities:
Net Income $ 638,190 $ 953,690
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation 966,196 798,248
Equity in income of joint ventures (44,607) (147,416)
Increase (decrease) in deferred income taxes (51,877) 14,002
Decrease in accrual for environmental cleanup (20,706) (14,761)
Net change in operating assets and liabilities 666,218 (1,018,680)
Net cash provided by operating activities 2,153,414 585,083
Cash Flows From Investing Activities:
Purchases of property, plant and equipment (2,573,867) (784,222)
Decrease in amounts receivable from
related parties 159,838 514,488
Net cash used in investing activities (2,414,029) (269,734)
Cash Flows From Financing Activities:
Net borrowings (repayments) under
credit facilities 512,070 (16,258)
Treasury stock transactions 131,722
Net cash provided by financing activities 512,070 115,464
Effect of foreign exchange rate changes on cash (285) 762
Net increase in cash 251,170 431,575
Cash at beginning of period 1,039,760 799,268
Cash at end of period $1,290,930 $1,230,843
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for:
Interest $396,097 $300,267
Income taxes 354,322 584,901
<FN>
See notes to consolidated financial statements.
/TABLE
<PAGE>
<PAGE>
WEDCO TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. BASIS OF PRESENTATION
The financial statements as of June 30, 1995 and for three months
ended June 30, 1995 and 1994 are unaudited; however, the March 31, 1995
balance sheet was derived from audited financial statements. In the
opinion of management, such financial statements include all adjustments
(consisting only of normal recurring items) necessary for a fair
presentation. The results of operations for the three months ended
June 30, 1995 are not necessarily indicative of the results to be
expected for the entire year. Certain 1994 amounts have been
reclassified to conform to the current presentation.
All 1994 per share amounts have been retroactively restated to
reflect the 5% stock dividend distributed on September 30, 1994.
These financial statements, note disclosures and other information
should be read in conjunction with the financial statements and related
notes of the Company's Annual Report on Form 10-K for the fiscal year
ended March 31, 1995, as filed with the Securities and Exchange
Commission.
<PAGE>
<TABLE>
2. INVENTORIES
Inventories at June 30, and March 31, 1995 consist of the
following:
<CAPTION>
June 30 March 31
<S> <C> <C>
Raw materials, parts and supplies $1,666,254 $1,696,840
Work in process 466,060 334,169
Total $2,132,314 $2,031,009
<FN>
</TABLE>
If all of the Company's inventories were costed on the first-in,
first-out method, inventories would have been approximately $624,000
higher at June 30 and March 31, 1995.
<PAGE>
<TABLE>
3. INVESTMENT IN JOINT VENTURES
The following table summarizes the status and results of the
Company's investment in joint ventures for the three months ended
June 30, 1995.
<CAPTION>
Micronyl-
WedTech Inc. Wedco S.A. Total
<S> <C> <C> <C>
Balance, April 1, 1995 $2,890,164 $1,911,631 $4,801,795
Equity in income (loss) (7,380) 51,987 44,607
Adjustment due to foreign
currency translation (10,138) (10,138)
Balance, June 30, 1995 $2,882,784 $1,953,480 $4,836,264
</TABLE>
<PAGE>
4. RELATED-PARTY TRANSACTIONS
As of March 31, 1995, the Company held a three-year, non-interest
bearing note receivable in the amount of C$1,026,305 ($732,269 at
March 31, 1995 exchange rates) from 1119935 Ontario Limited, a
corporation 100%-owned by John Lefas, President of WedTech Inc.,
the Company's Canadian joint venture. The note receivable
resulted from the sale of 1,026,305 non-voting, non-cumulative
Class D special shares of WedTech Inc. to 1119935 Ontario Limited
during the prior fiscal year. On April 3, 1995, the Company
received its first scheduled payment on this note receivable in
the amount of C$342,101 or $245,800 at April 3, 1995 exchange rates.
5. COMMITMENTS AND CONTINGENCIES
In conjunction with the sale of real estate owned by a former
subsidiary, the New Jersey Department of Environmental Protection
and Energy (D.E.P.E.) issued an Administrative Consent Order (A.C.O.)
to the Company under the Environmental Clean-up Responsibility
Act (E.C.R.A.). According to E.C.R.A., property title cannot pass
to a new owner until the D.E.P.E. is satisfied that the property
meets defined environmental standards or an A.C.O. has been issued.
Inspections have shown the groundwater at this site contains
contaminates which must be removed. Accordingly, a remediation
plan was prepared and approved by the D.E.P.E. The Company has
provided accruals of $1,400,000 for costs related to cleanup
activities, of which, approximately $1,100,000 has been paid as
of June 30, 1995. Recent sampling results indicate that the
Company's groundwater remediation program is working effectively
to reduce the level of groundwater contamination. Expenses in
excess of what the Company has recorded could be incurred due to
the inherent uncertainty surrounding the extent of contamination,
the complexity of governmental regulations and their interpretations
and the varying costs and effectiveness of cleanup technologies.
The Company believes, however, that its reserve is sufficient to
satisfy current D.E.P.E. requirements.
<PAGE>
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Wedco's operating results for the three-month period ended June 30,
1995 indicate a 15.9% increase in net revenues and a 23.0% decrease in
operating income when compared to the same period of the prior fiscal year.
The slowdown in the U.S. economy's growth rate during the current
three-month period, as compared to the same period of the prior fiscal
year, resulted in declines in the utilization of machinery and equipment
and the absorption of certain overhead costs in several of the Company's
domestic facilities. Furthermore, a portion of the increase in revenues
reported during the current period is attributed to an increase in
compounding services provided by the Company's Dutch subsidiary.
Such compounding revenues yield a lower margin than traditional
processing services. Income from the Company's equity in joint
ventures decreased by 69.7% during the current three-month period,
as a result of a decline in earnings experienced by the Company's
French and Canadian joint ventures. Interest expense increased by
12.2% during the quarter ended June 30, 1995, as compared to the same
period of 1994. The decreases in operating income and joint
venture earnings, offset by a decrease in income taxes, resulted in
a 33.1% decline in net income during the three-month period ended
June 30, 1995, as compared to the same period of the prior fiscal
year.
Net Revenues and Operating Income
Wedco reported an increase in net revenues of approximately $1,538,000
for the three months ended June 30, 1995 when compared to the same
period in 1994. The components of this increase were as follows:
<TABLE>
<CAPTION>
Three Months Ended June
Components of Revenue Growth 1995 vs. 1994
<S> <C>
Processing services:
Volume decrease $ (495,000)
Change in average price
per pound (1) 1,074,000
Machinery sales 307,000
Foreign currency translation (2) 652,000
Total revenue growth $1,538,000
<FN>
(1) Based on average price per pound, which is affected by
product mix and volume processed during the period.
(2) Due to changes in the translation rates used to convert the
revenues of Wedco Europe B.V. into U.S. dollars.
</TABLE>
<PAGE>
During the three months ended June 30, 1995, the Company processed
approximately 99 million pounds of material as compared to approximately
105 million pounds in the same period of the prior fiscal year.
This decrease in volume is reflective of the slight decline
in the U. S. economy experienced during the three-month period ended
June 30, 1995 when compared to the same period in 1994, as well as an
increase in competition in United States. On a consolidated basis, as a
percentage of net revenues, operating expenses, excluding general
corporate expenses, were 82.3% and 75.5% for the three months ended
June 30, 1995 and 1994, respectively. Operating margins have declined in
the current three-month period as a result of the underutilization of
machinery and equipment, increased labor costs in certain domestic
locations, the increase in lower margin compounding revenues experienced
in Europe, and the incremental fixed costs associated with our new facility
in Stenungsund, Sweden. General corporate expenses, as a percentage of
net revenues, were 6.7% and 7.9% for the three-month periods ended
June 30, 1995 and 1994, respectively. The decrease in this percentage is
a result of the increase in net revenues experienced during the current
period.
Other Income (Expense)
During the three months ended June 30, 1995, income from the
Company's investment in joint ventures decreased by approximately
$103,000 or 69.7% as compared to the same period of the prior fiscal year.
Both of the Company's joint ventures reported a decline in earnings during
the quarter ended June 30, 1995. In France, Micronyl-Wedco S.A.'s earnings
declined slightly as a result of a small decrease in the volume of materials
processed during the three-months ended June 30, 1995, as compared to the
same period in 1994. In Canada, WedTech Inc.'s earnings continue to be
negatively impacted by ongoing costs associated with its sales, marketing and
administrative office in Toronto, Canada and its research and production
facility in Dewey, Oklahoma. Under the equity method of accounting, net
revenues of the joint ventures are not included in the consolidated net
revenues of the Company.
As a result of the increase in the U.S. prime rate and increased
foreign borrowings, interest expense increased by approximately $40,000
or 12.2% during the three-month period ended June 30, 1995, as compared
to the same period in 1994.
Income Taxes
As a result of the 35.3% decline in pre-tax income during the three
months ended June 30, 1995 as compared to the same period in 1994,
the Company's consolidated income tax provision declined by 39.9%.
Foreign Currency Translation
The fluctuations of the dollar against the Dutch guilder and the
British pound have impacted the translation of revenues and income
of Wedco Europe B.V. into U.S. dollars for the three months ended
June 30, 1995 as compared to the same period of the prior fiscal
year. The increase, due to this translation impact, in certain
amounts shown on the Consolidated Statements of Income follows:
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended June 30
1995 vs. 1994
<S> <C>
Net revenues $ 652,000
Operating income 114,000
Pre-tax income 101,000
Net income 80,000
</TABLE>
<PAGE>
Gains and losses from the translation of certain balance sheet
accounts are not included in determining net income, but are
accumulated as a separate component of stockholders' equity.
These unrealized gains and losses are also subject to deferred
income taxes. As a result of the dollar's fluctuation against
the Dutch guilder and British pound and changes in the net
assets of foreign subsidiaries, stockholders' equity decreased,
net of deferred income taxes, by approximately $188,000 during
the period of March 31 to June 30, 1995.
Financial Condition
Working capital decreased from March 31 to June 30, 1995 by
approximately $781,000. While several components of working capital
fluctuated during this three-month period, the $781,000 decrease
is primarily the result of decreases in accounts receivable and amounts
due from related parties, offset by increases in inventories, short-term
notes payable, accrued expenses and other current liabilities.
The decrease in working capital resulted in a decline in the Company's
current ratio from 1.1:1 at March 31, 1995 to .99:1 at June 30,
1995. The Company intends to refinance certain short-term notes payable,
associated with establishing its new subsidiary in Sweden, as long-term debt.
Once this refinancing is completed, the Company's current ratio should
improve. As of June 30, 1995, the Company's debt to net equity ratio,
including notes payable and current maturities of long-term debt, remained
relatively unchanged at 0.76:1 from March 31, 1995. The Company
anticipates improvement in this ratio during the current fiscal
year.
Capital Expansion and Resources
During the three months ended June 30, 1995, the Company generated
approximately $2,150,000 in cash from its operating activities, a
$1,568,000 increase when compared to the same period of fiscal 1995.
Substantially all of the cash generated in the current three-month
period was invested in capital expenditures. Net cash used in
investing activities increased to $2,414,000 for the three months
ended June 30, 1995 from $270,000 in the same period of the
prior fiscal year. This fluctuation reflects a $1,790,000 increase
in capital expenditures, as well as a $354,000 decrease in the amounts
collected from related parties during the three months ended
June 30, 1995. Cash flows from financing activities increased by
approximately $397,000 during the three-month period ended
June 30, 1995 as compared to the same period of the prior
fiscal year, primarily as a result of an increase in short-term
borrowings by the Company's European subsidiary.
For the year ending March 31, 1996, management's objective is to
foster growth in earnings, through productivity improvements and
increased capacity utilization. With that strategy in place, a capital
budget of approximately $6.8 million has been proposed for fiscal
1996. The Company anticipates that capital expenditures for fiscal
1996 will be limited to maintaining or improving the Company's
existing facilities and installing new processing systems required to
meet specific market opportunities. The Company anticipates
financing its capital expenditures with cash provided by operating
activities and additional borrowings, if needed. Currently, the
Company has approximately $8.3 million available under its domestic
and foreign credit facilities.
<PAGE>
Contingencies
In regard to the environmental cleanup, discussed more fully in
Note 5 to the Consolidated Financial Statements, the Company
anticipates paying for cleanup costs with cash provided by
operations. If the current provision remains adequate, these costs
should not significantly affect the financial position, results
of operations or cash flows of the Company.
<PAGE>
<PAGE>
PART II: OTHER INFORMATION
ITEM 1. Legal Proceedings:
No matters to report.
ITEM 2. Changes in Securities:
None.
ITEM 3. Defaults Upon Senior Securities:
None.
ITEM 4. Submission of Matters to a Vote of Security
Holders:
None.
ITEM 5. Other Information:
None.
ITEM 6. Exhibits and Reports on Form 8-K:
(a) Exhibits
27 Financial Data Schedule
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
WEDCO TECHNOLOGY, INC.
August 11, 1995 /s/William E. Willoughby
Date William E. Willoughby
President and Chairman of the Board
August 11, 1995 /s/Robert F. Bush
Date Robert F. Bush
Vice President - Finance
<PAGE>
<PAGE>
Exhibit Index
Exhibit No. Description
27 Financial Data Schedule for the
1st quarter ended June 30, 1995
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> This Schedule contains Summary Financial Information
extracted from the Balance Sheet and Statement of Income
and is qualified in its entirety by reference to such
financial statements.
<S> <C>
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-START> APR-1-1995
<PERIOD-END> JUN-30-1995
<PERIOD-TYPE> 3-MOS
<CASH> 1,290,930
<SECURITIES> 0
<RECEIVABLES> 6,888,206
<ALLOWANCES> 52,561
<INVENTORY> 2,132,314
<CURRENT-ASSETS> 11,725,883
<PP&E> 65,643,499
<DEPRECIATION> 27,220,041
<TOTAL-ASSETS> 58,156,324
<CURRENT-LIABILITIES> 11,873,464
<BONDS> 15,905,122
0
0
<COMMON> 409,489
<OTHER-SE> 27,151,142
<TOTAL-LIABILITY-AND-EQUITY> 58,156,324
<SALES> 11,209,348
<TOTAL-REVENUES> 11,209,348
<CGS> 6,979,973
<TOTAL-COSTS> 9,977,477
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 371,464
<INCOME-PRETAX> 917,234
<INCOME-TAX> 279,044
<INCOME-CONTINUING> 638,190
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 638,190
<EPS-PRIMARY> .18
<EPS-DILUTED> .18
</TABLE>
